Tax credit is 'an important carrot' for early-stage biotechs

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September 9, 2013 at 3:00 AM

Soligenix Inc. hasn't claimed benefits from the Orphan Drug Tax Credit because the pre-revenue company has yet to generate taxable profits.

But that's the goal.

"It's an important carrot for us," said Chris Schaber, CEO for the Princeton biotech. "Drug development does not carry a huge success percentage. This is critical for a small business. It's an important added incentive to get you on your feet."

Schaber and other executives of New Jersey companies developing orphan drugs will be paying close attention to the chatter surrounding whether Congress will eliminate business tax credits in order to simplify the tax code.

Soligenix has four drugs in its pipeline that have been granted orphan drug status, plus two more with potential, according to Schaber.

Schaber said the upfront benefits given to such companies entice them to explore cures for orphan diseases. He sees the tax credit as the finishing piece to the package.

"If you take off the carrot at the back end, there could affect the overall approach and reduce how many companies will go into this," Schaber said.

The uncertainty worries groups advocating for New Jersey life science companies. Dean Paranicas, president of the Health Care Institute of New Jersey, said companies need clarity from the tax code if they are going to commit to developing costly medicines.

"When you think about the huge investment that goes into developing of drugs of any type, and the risk it entails, to incentivize the development of therapies is extremely important," Paranicas said. "This is what companies need in order to plan and invest."

While the incentives benefit small companies, Schaber said the fact that large companies — including Pfizer and Celgene — have divisions focused on developing orphan drugs shows growing attraction to this field.

"People see value not only to saving lives in small populations, but there is a model for commercialization and generating revenue," Schaber said.